In the wake of the Federal Reserve’s decision to raise interest rates the Pound Sterling to US Dollar (GBP/USD) exchange rate has remained under pressure.

Although the rate hike was largely anticipated the relative hawkishness of comments from policymakers encouraged the US Dollar (USD) to push higher against its rivals.

As the Fed looks set to raise interest rates two more times before the end of the year the prospect of this more aggressive monetary tightening cycle supported USD exchange rates.

Even so, Sean Callow, research analyst at Westpac, commented:

‘On the positive side, the projections reinforced recent comments from officials that the Fed’s baseline scenario is that the funds rate is likely to be raised a little above the long term or neutral rate.

‘We continue to expect this to lend underlying support to the US dollar, albeit tempered by the US’s widening fiscal and trade deficits and of course the fact that markets already have priced in ongoing rate rises.’

GBP/USD Exchange Rate Fails to Benefit From Stronger UK Retail Sales

Although the UK’s May retail sales data proved unexpectedly positive this failed to keep the Pound Sterling to US Dollar (GBP/USD) exchange rate on a stronger footing for long.

Markets remain concerned by the underlying fundamentals of the retail sector, which looks set to come under further pressure over the coming months as Brexit jitters mount.

Confidence in Pound Sterling (GBP) is unlikely to pick up significantly ahead of Thursday’s Bank of England (BoE) policy announcement.

While there is no expectation that the BoE will opt to raise interest rates at this juncture investors are still keen to gauge the outlook of policymakers.

If the BoE shows signs of hesitance this could undermine the odds of an August interest rate hike, undermining the appeal of the Pound.

On the other hand, greater signs of confidence would offer GBP exchange rates a solid rallying point.